It’s been quite a week for 22-year-old Cait Reilly. After spending 18 months waiting in vain for her phone to ring with the offer of any one of the hundreds of jobs she has applied for since graduating in the summer of 2010 from Birmingham University, these past few days it hasn’t stopped. And all because of two weeks on a government unemployment programme in her local Poundland in King’s Heath, West Midlands.

A triumph for the scheme presented by ministers as giving 250,000 claimants on jobseekers’ allowance a helping hand back into the workforce? Not quite. For Reilly has made headlines because she is mounting a legal challenge to what she says was the “forced labour” of being made to stack shelves for free in the discount retailer, or lose her £53-a-week in dole. “I was told it was mandatory. There were five of us sent there. I was the only graduate. We were doing exactly the same work as the paid staff. It makes no sense. If the Government subsidises high street chains with free labour, they don’t have to recruit. It causes unemployment rather than solves it.”

What makes the mandatory placement more puzzling, adds Reilly, whose degree was geology, was that going to Poundland meant she had to give up a volunteer post she had at the local Pen Room Museum, part of her plan to gain the experience that would help her along her chosen career path as a curator.

“Right now, I would take any job. I have £18,000 in student debts to pay off and the interest is building all the time. That really worries me. But I have plenty of retail experience already on my CV. I didn’t need to go to Poundland. And I was never told I had a choice.”

Her adviser at the Job Centre has, she reports, been replaced. The Department of Work and Pensions, which oversees the scheme, has responded to her allegations by insisting that, within reason, such “sector-based work academy” schemes are optional. And Chris Grayling, the employment minister, has in the past robustly defended the programme, pointing out that “half of young people leave benefits after they have completed their placement”.

The problem in Reilly’s case seems to be that, as a graduate, her career expectations were different from many other claimants. But she is not, in reality, so unusual. Of those who graduated at the same time as her, in 2010, half were either jobless six months later, or in menial roles. Another survey reports that 38 per cent of graduates have been on the dole after leaving university. And longer-term data from the Higher Education Statistics Agency reveals that 28 per cent of 2006 graduates were not in full-time employment three years later, while, among those who were, only 16 per cent of the men were earning over £20,000, and 29 per cent of the women.

This last figure is particularly significant since, under new tuition fee arrangements, those embarking from this September on degree courses that will cost up to £9,000 a year will only have to start repaying their tuition fees once their income rises above £21,000. The Treasury, it seems, may be about to take a substantial hit.

Reilly remains phlegmatic about her joblessness. “Someone is getting the posts I am applying for, so I have to believe that one day that person will be me. That’s the logic.”

Does she regret not tackling something more vocational – law, medicine, engineering – rather than geology?

“I did think about that before I started, but I loved the subject and geology can provide a whole range of careers in civil engineering, mining, oil exploration and property. So it was a practical choice.” But of her cohort, she says, only one – “and he got a first” – has got a job that uses his degree.

Defending the hike in tuition fees, the Government argues that undergraduates are speculating to accumulate. By taking out loans to pay for a higher education, they are giving themselves the prospect of better-paid careers than school-leavers that will more than justify that investment. However, the Office of National Statistics reported last August that a quarter of graduates are earning less than contemporaries who joined the workforce after A-levels. And even with the other three quarters, the graduate pay premium is shrinking. One factor, it seems, is that the rapid expansion in higher education under Labour has seen the percentage of university-educated workers grow since 1993 from 12 to 25 per cent. And it continues to rise.

“I don’t regret going to university,” says Holly Jerreat, 22, who graduated last summer with a 2:1 in languages from Bath, “but with hindsight I might have done a more vocational course. I chose languages because it was a subject I loved and found intellectually challenging. But here I am, still looking for work.”

Jerreat, who has returned home to live with her parents in Kent, has filled in “endless application forms” for graduate posts in marketing, advertising and media, and has come very close several times to landing the job of her dreams, but the competition is stiff and openings few and far between. To pay

her way in the interim, she has applied “for every job going in our local Bluewater shopping centre. I write off, send in CVs, go in and ask face-to-face, and then get told I am over-qualified.” Currently she is doing a part-time administrative post she got through a family connection. “Basically I do the shredding.”

In these hard times for recent graduates, such family connections – much decried by the Deputy Prime Minister, Nick Clegg, as “the exclusive preserve of the sharp-elbowed and the well-connected” – are one way to gain an advantage.

“I spent a year and a half doing various temping jobs,” says 25-year-old Howard de Podesta, who graduated in aerospace engineering from Bath, “before getting a job in product design in financial IT off the back of an internship. That is the route many graduates go down now.”

People like 24-year-old Kate Ross, who graduated in combined social sciences from Durham in 2009, and then landed a three-month paid internship with a hotel management company with the help of her sister who worked in recruitment. “Having that experience helped me impress my current employer, a property company. Without experience, no one will touch you, however good your degree or your university. You have somehow to find a way to get that experience.”

Unpaid internships, though, especially in London and big cities, depend on being able to rely on family for free accommodation and pocket money. Ross squared the circle by taking a part-time post as a live-in au pair, even though she had no formal training in caring for children. “I was actually better off when I was living for nothing there than when I started work properly and had to pay rent on a flat.”

And therein is another problem. Even when graduates find jobs, starting salaries are so low that it makes it very hard to stand on your own.

“It seems to take friends from university around a year to find a 'proper’ job,” recounts Jerreat, “but they rarely pay more than £18,000. Once you have stated paying back your student loans, which kicks in at £15,000 for my age group, and then pay rent, it really doesn’t leave anything to live on.”

The unpaid internship industry is, says Cait Reilly, pretty much a closed book for her. “I think it probably does skew the market against people like me. I live at home, but my parents can’t afford to support me. I have to make a contribution to my living costs. If I had the option of not signing on, I’d take it like a shot. It tars me with the same brush in the eyes of those who see anyone claiming benefits as lazy or scroungers. And yes, I would be prepared to travel and live somewhere else for work, but it would have to be paid for me to afford to be able to do it.”

So has her week of making headlines and taking calls helped her job search? “No,” she reports flatly. “Or not yet. Some of my friends think I am mad to go to court, that the legal action will mean that no employer will want anything to do with me, but for me it is an abuse that needs highlighting. The idea that any work experience, however irrelevant and menial, will be beneficial just doesn’t add up.”